We are watching people put a price on their reputations in realtime.
Their bet is they will make so much money they won't need them.
Here's the thing. I've seen this many times. And it will probably work and be fine.
But as I'm struggling to teach my 7 yr old these days, it's what you do when nobody is looking. Fear of repercussions is the lowest bar.
This also implies you should not worry if people get what is coming to them. That can be the thought of someone who abstains bc they fear repercussions themselves.
It will sap your energy to concern yourself. Just protect yourself and others who you can protect.
(not that I think many people are losing sleep over the grift parade, more concerned that FOMO effects are distorting people's perceptions. And I think that is a real thing that leads to gambling etc)
Anyway....
Dealing with my 7 yr olds phase right now and how I think there's a bunch of 7 year olds with influence and that will always be true.
Can only worry about yourself ultimately. Karma doesn't happen on your schedule and sometimes never happens visibly. Some people are dead inside
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An example of thinking about wanting to be long options where the stock ain't going.
In my PA I might consider stock replacement. Not ITM calls though. OTM calls.
Why?
The first thing most might think is "steep upside slope"
That's not exactly what I'm thinking.
US large cap is expensive by every measure. Fine. Well Meb Faber said Japan went to 90 p/e. The market could 2 to 3x from here on flat earnings. Falling behind on that would suck. Not acceptable. Wealth effect would mean I could never afford a house in that world.
Still...
That's not really the driver of the trade expression. It's that given the valuation I'm ok missing a 10% rally say but if the market rolls over there's my actual win condition.
Not being overly exposed to the sell-off (I know stonks only go up)
A thread about directional edge vs carry based on a convo I had with a younger trader.
His strategy was to sell options when IV was in the 100th percentile. What are some problems with this?
The most obvious is that 100th percentile depends on your lookback window and the relevance of that window is I don't know, arbitrary. The historical distribution of IV does not need to have any relevance with respect to qualitative information you have today. (Umm, GME).
Here's another issue.
Any day when vol goes up after a 100th percentile IV day is just another 100th percentile IV day.
The next day given, that you just hit 100th percentile yesterday, just doesn't care that yesterday was a "top" compared to the days that preceded it.
Watching finance/tech moguls who have ridden govt-sponsored near zero cost of capital to multi-gen wealth not answer the door when the govt comes back around looking for a wealth tax rebate
Don't get me wrong it's a bad idea...but strictly for practicality reasons. Not for some ethical or other made up incentive theory. We haven't cared about sht like that since GS was made whole on AIG CDS, entrenching TBTF, and favoring monetary over fiscal until a pandemic hit.
Next time the govt buys assets to stimulate the economy it should also buy a lookback option from the asset sellers. Then we can say "look you knew the rules before you took the money". They still would have signed up bc people love to sell options too cheap...
Publishing an option post today that emerged from writing Moontower this week. It's about a qualitative intuition for option behavior esp spot/vol correlations.
Option greeks esp as you get into 2nd order ones like gamma, vanna and volga often cause a listener to slow down...
They say "ok, wait what's gamma again...[start recalling some if...then scenarios]"
I have 2 quick heuristics that can make the effect of a vol change more clear especially if you imagine an extreme change in vol (so if your scenario is "vol down", mentally crank it down to 0)
Heuristic
1. "Further away heuristic"
If vol goes down, all OTM options become "further away". The effect on greeks is obvious. Just imagine the extreme as vol goes to zero. All the greeks go to 0. Deltas and second order greeks.